《The Wall Street Journal》: Stablecoins Essentially Private Money, May Pose Risks to Financial System

May 26 — A Wall Street Journal report argues stablecoins are essentially “private money.” While legislation like the GENIUS Act and CLARITY Act works to bring stablecoins into regulatory compliance, these digital assets still pose structural risks to the broader financial system. Stablecoins were designed to pair the U.S. dollar’s stability with the efficiency of blockchain-based payments. But because they operate on fragmented, privately run infrastructure, they lack the “uniformity” of the traditional U.S. dollar framework. Even major stablecoins like USDT and USDC, which are pegged to the dollar, can still stray from their $1 peg. Stablecoin issuers have a natural incentive to scale up their offerings and “chase yield,” often investing in higher-risk, less liquid assets to boost returns. If the value of these underlying assets drops, a stablecoin may fail to hold its peg, triggering user redemptions and wider market ripple effects. Citing Chainalysis data, the report notes stablecoins account for 84% of illicit crypto activity—including sanctions evasion and money laundering. Right now, stablecoins are primarily used for crypto trading: less than 1% of their total usage goes toward real-world economic transactions. Stablecoins are repeating the pattern of the 19th-century U.S. “Free Banking Era” private money experiment. Though they remain a key direction in payment technology evolution, stablecoins will likely face far stricter regulation and deeper integration into central bank systems in the future, much like traditional banks.